The metaphors people use to describe intellectual property disputes are a lot more martial than they used to be. But then, the stakes are higher than ever. As industries grow steadily more sophisticated about the way they manage and defend their innovations, the consequences for missteps expand proportionally. With less and less margin for error, companies are increasingly willing to do battle over their most critical IP.
“A couple years ago, we were fending off trolls, but now it seems like we’re doing global warfare for competitors,” says Brian Busey, an IP litigator at Morrison Foerster. “Trolls haven’t gone away, but now at the same time companies have to manage larger litigation involving competitors, and it’s gone global. A lot of in-house counsel are flying all over the world, managing cases from Germany to Seoul.”
That uncertainty drove a blockbuster year for IP deals. In June, a consortium including Apple Inc., Microsoft, Ericsson, Sony and Research In Motion Ltd. ponied up $4.5 billion to acquire 6,000 patents from the bankrupt Canadian company Nortel Networks Corp. It was the most ever paid for a pool of patents. Google Inc., which was outbid in the auction, responded by paying $12.5 billion to acquire struggling Motorola Mobility Inc., largely for its patent portfolio.
Such astronomical price tags were inflated by the strategic value of patents in the smartphone wars.
Today’s IP litigation knows no borders.
“When I started doing ITC litigation in the late ’80s, the ITC had maybe 10 or 12 cases a year,” he says. “There were 69 new investigations through the end of [the 2011] federal fiscal year, which is an all-time record. There’s something like 100 active matters and there are trials every week. These are mostly big cases, lots of them involving smartphones, LEDs and GPS technology.”
These high-tech battles may be setting the tone for IP litigation around the world and establishing tactics that will ripple through corporate practice for years to come, but they won’t last forever.
Tomorrow’s IP battles will be fought at the USPTO.
The AIA is a collection of so many new initiatives and tweaks to existing programs that sweeping generalizations are difficult, but a theme that runs through many of the law’s provisions is one of openness and collaboration with the patent system’s many stakeholders throughout the patent life cycle.
Up to now, the patent office acted more or less on its own in granting patents, and those that it issued were presumed valid. The elephant in the room was the fact that the patent office has nowhere near the resources required to look at everything that could affect validity. Large numbers of invalid patents made it into the marketplace, inevitably leading companies to fight it out in court.
In either process, the matter is reviewed at the highest level of the patent office and usually resolved within a year. That’s a fraction of the time litigation takes, but the onus is on companies to step into the process.
“In the past it was probably sound practice to effectively put your head in the sand and wait until you were sued because you didn’t want to be accused of having knowledge of a patent and being a willful infringer,” Bednarek says. “Even if you became aware of someone else’s patent application, there was little you could do to stop it. That is changing in a dramatic way because of the AIA. The lesson for companies is to be more proactive.”
Many counsel are under pressure to monetize patents.
Options abound. As the pressure to monetize patents has mounted, a whole industry has sprung up to help companies sell, manage or pool their IP. The number of alternative structures available is growing at an astounding rate.
Companies can auction off patents individually or in bundles. They can farm out their assets to licensing shops that try to generate royalty streams. They can sell to defensive aggregators that pool vast numbers of patents to counterassert against trolls, or bite the bullet and sell to the trolls themselves. There’s no clear-cut right answer. A lot of how a company chooses to monetize its portfolio is driven by its size, internal capacities and level of financial necessity.
In an environment where so many new entities are banging at corporate doors, asking to take over the portfolio, companies have to be skeptical. As patents have become more liquid, they’ve grown more volatile. The new third parties in the market are morphing as they grow, making committing to them a somewhat dicey proposition.
“When you get in bed with people who assert patents, you’ll find it very difficult to get the money that they promised you,” says HP’s Roeder. “All it does is just whip up more and more patent litigation. That pressures other people to do the same thing, and it just feeds the problem. We all lose when that happens.”